Power shortage as election issue

Until last week May 3, another yellow alert has been issued by the National Grid Corp. of the Philippines (NGCP) because of insufficient reserves due to the following: (a) forced outage due to earthquake of GN Power Mariveles (316 MW), (b) unplanned/forced outage of SEM Calaca U2 and Team’s Pagbilao U1 (582 MW), and (c) derated/reduced capacity of five power plants (736 MW). Total 1,634 MW unavailable, that’s big.

These yellow alerts and occasional red alerts (which require rotational blackouts) have been going on since around mid-March this year — and have become an election issue for some sectors. This week we are lucky with thick clouds daily and occasional rains, meaning power demand is low. Mid-terms election on Monday, we pray that the thick clouds will stay.

Numbers below will further illustrate how weak and unreliable the Philippines’ power sector is — which explains the recurring power shortages and, in the process, higher power prices. For instance, these three socialist economies have shockingly more power capacity per person than supposedly capitalist Philippines: Vietnam has 2x, Laos has 5x, and N. Korea has 6x (see table).

Official DoE data show that the Philippines’ installed capacity was 21.42 GW in 2016, 22.73 GW in 2017, and 23.82 GW in 2018. Nonetheless I use the CIA numbers for comparison purpose.

Four recent stories in BusinessWorld would give more contexts to this situation and I quote portions of them.

1. Power panel passes amendments to EPIRA IRR (May 3):

“THE Joint Congressional Power Commission (JCPC) on Thursday approved amendments to the implementing rules and regulations (IRR) of the Electric Power Industry Reform Act Law (EPIRA) to facilitate the granting of benefits to host communities.”

2. Invitation still open for Chinese merchant power plant builders — Energy dep’t says (May 3):

“We asked both Japan and China to help us put up a merchant plant and this is part of an MoU that we successfully signed in China.”… Aside from the China-funded coal-fired power plants, the DoE has encouraged private sector investment in… liquefied natural gas (LNG).”

3. On credit ratings upgrade and power shortage risk (May 6, opinion piece by Romeo L. Bernardo):

“Chair Devanadera’s chart shows that there are 454 Power Supply Agreements Requiring Further Action, involving 150 power plants. How long does an evaluation take and how many technical people has the Energy Regulatory Commission assigned to evaluate? Answer: 90-180 days; 14 technical personnel.

The ERC can be more faithful to market based competition principles… by moving away from detailed cost based review of every PSA… a simple validation of adherence to Competitive Selection Process rules to ensure arms length competitive contracting would be a fairly quick and straightforward alternative approach.”

4. ERC’s competitive selection rules expected in 30 days (May 7):

“…final rules on competitive selection process (CSP), a scheme that chooses the lowest-cost power for consumers… require the generation companies to shoulder the cost of unscheduled plant outages…. a template for a power supply agreement (PSA) … provision on replacement power.”

Story #1 is bordering on a risky proposal by some sectors to amend the EPIRA law of 2001. I say ‘risky’ because once EPIRA is amended, the probability of that law becoming worse — more state-control of power generation and supply vs better/market competition — becomes 75-25.

Story #2 is eliciting another anti-China communist government sentiment here. The communist bully that steals Philippines territory at the WPS/SCS is being invited by the Duterte government to build more dams, airports, telecoms, power plants, other sectors that are strategic for national security.

Opinion #3 offers good and practical proposals so that ERC should move away from a micro-managing central planner and further relax regulations, so that we should have more new and big power plants today, not three to five years from now.

Story #4 is good, CSP rule is long overdue and having a template for all PSAs is important. If power supply remains tight, the cost of replacement power will be high so ERC should further deregulate pricing by gencos. Having more new reliable power sources at WESM will remedy this.

We should stay the course of more market players and competition, less government regulations and over-bureaucratism of power supply approval and pricing.

Bienvenido S. Oplas, Jr. is the president of Minimal Government Thinkers

minimalgovernment@gmail.com